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U.S. identifies Bank of Moscow and Gazprombank units subject to sectoral sanctions

The U.S. Treasury Department on Thursday stepped up financial sanctions aimed at punishing Russia and producing a diplomatic resolution to the conflict in Ukraine.

Treasury's Office of Foreign Assets Control (OFAC) blacklisted 37 additional individuals and entities and took action to support its so-called sectoral sanctions program by identifying subsidiaries owned 50 percent or more by previously sanctioned Russian companies. The latter may be helpful to U.S. banks that have had difficulty identifying such entities.

"Russia continues to provoke instability in eastern Ukraine despite its Minsk commitments," John E. Smith, acting director of OFAC, said in the Treasury announcement. "Treasury stands with our partners in condemning Russia’s violation of international law, and we will continue to sanction those who threaten Ukraine’s peace, security, and sovereignty."

OFAC added that its action "also underscores the U.S. government's opposition to Russia's occupation of Crimea and our firm refusal to recognize its attempted annexation of the peninsula."

The new OFAC sanctions come in the wake of recent European Union sectoral sanctions. The timing demonstrates "continued international unity in opposing Russia’s actions in Ukraine," OFAC said.

The sectoral sanctions were announced by President Barack Obama in July 2014 as the United States stepped up pressure on Russia over its support for separatist rebels in war-torn Ukraine. The measure bars U.S. companies from engaging in any "new debt of longer than 90 days maturity or new equity" with targeted firms, an effort intended to punish Russia by increasing its financing costs.

OFAC on Thursday identified nearly 100 subsidiaries of the previously designated Bank of Moscow and Gazprombank that are 50 percent or more owned by their respective parent entities and therefore subject to the same sanctions under the sectoral regime.

U.S. financial institutions have struggled to comply with the highly complex sectoral sanctions regime which requires exceptional due diligence. Bankers have cited identification of entities 50 percent or more owned by sanctioned entities as a significant challenge, making OFAC's list a useful document that must be acted upon immediately.

"These identifications will help the public more effectively comply with the sanctions on these companies," OFAC said.

Detailed information on the newly blacklisted people and entities and the Bank of Moscow and Gazprombank subsidiaries can be found here:

Treasury Sanctions Individuals and Entities for Sanctions Evasion and Activities Related to the Conflict in Ukraine

9/1/2016

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U.S. Will Maintain Sanctions Pressure Until Russia Has Fulfilled All of Its Commitments under the Minsk Agreements

WASHINGTON – To maintain the effectiveness of existing sanctions, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today designated 37 individuals and entities under three Executive Orders (E.O.s) related to Russia and Ukraine. Today’s action is part of OFAC’s ongoing efforts to counter attempts to circumvent sanctions on Russia, to assist the private sector with sanctions compliance, and to foster a diplomatic resolution to the conflict in Ukraine. The action demonstrates Treasury’s steadfast commitment to maintain sanctions until Russia fully implements its commitments under the Minsk agreements, including a comprehensive cease fire, the withdrawal of all weapons and military personnel, and the restoration of Ukraine’s control over its side of the internationally recognized border. It also underscores the U.S. government’s opposition to Russia’s occupation of Crimea and our firm refusal to recognize its attempted annexation of the peninsula. These sanctions follow the recent extension of European Union sectoral sanctions, and together these steps demonstrate continued international unity in opposing Russia’s actions in Ukraine.

“Russia continues to provoke instability in eastern Ukraine despite its Minsk commitments,” said Acting OFAC Director John E. Smith. “Treasury stands with our partners in condemning Russia’s violation of international law, and we will continue to sanction those who threaten Ukraine’s peace, security, and sovereignty.”

Today OFAC also identified a number of subsidiaries that are owned 50 percent or more by previously sanctioned Russian companies to provide additional information to assist the private sector with sanctions compliance.

Designation Regarding Sanctions Evasion (E.O. 13661)

Today’s action targets one entity pursuant to E.O. 13661, which authorizes sanctions on, among others, any individual or entity that has acted for or on behalf of, or supported, an individual or entity previously designated under this E.O.

CJSC ABR Management (“ABR Management”) is designated for acting for or on behalf of, directly or indirectly, and materially assisting, sponsoring, or providing, financial, material, or technological support for, or goods or services to or in support of, Bank Rossiya. Bank Rossiya managers founded ABR Management to strategically manage the banking group’s assets. As the trustee under a trust agreement with certain Bank Rossiya shareholders, ABR Management has the power to exercise voting rights for a majority of Bank Rossiya shares, including rights to propose candidates for Bank Rossiya management positions.

Designations Regarding Separatists (E.O. 13660)

Today’s action also targets 17 Ukrainian separatists pursuant to E.O. 13660 for being responsible for or complicit in actions or policies that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine; asserting governmental authority over a part or region of Ukraine without the authorization of the Government of Ukraine; or for acting for or on behalf of previously designated groups as leaders of such entities.

The following six individuals are designated for being responsible for or complicit in, or having engaged in, directly or indirectly, actions or policies that threaten the peace security, stability, sovereignty, or territorial integrity of Ukraine; asserting governmental authority over a part or region of Ukraine without the authorization of the Government of Ukraine; and acting for or on behalf of the previously designated, self-proclaimed Donetsk People’s Republic (DPR) or the previously designated, self-proclaimed Luhansk People’s Republic (LPR): Eduard Basurin, so-called Deputy Commander of the Ministry of Defense, DPR; Viktor Yatsenko, so-called Minister of Communications, DPR; Vladimir Kononov, so-called Minister of Defense, DPR; Zaur Ismailov, so-called Prosecutor General, LPR; Evgeny Manuilov, so-called Minister of Finance, LPR; and Alexandr Shubin, so-called Minister of Justice, LPR.

The following 11 individuals, officials of the so-called Republic of Crimea, are designated for asserting governmental authority over a part or region of Ukraine without the authorization of the Government of Ukraine: Dmitry Polonsky, so-called Minister of Information and Mass Communications; Anna Anyukhina, so-called Minister for Property and Land Relations; Mikhail Sheremet, so-called First Deputy Chairman of the Council of Ministers; Svetlana AlekseevnaBorodulina, so-called Minister of Fuel and Energy; Irina Kiviko, so-called Minister of Finance; Valentin Demidov, so-called Minister of Economic Development;Oleg Shapovalov, so-called Minister of Justice; Andrey Gennadievich Vasyuta, so-called Minister of Industrial Policy; Viktor Palagin, so-called Head of the Federal Security Service Directorate; Mikhail Nazarov, so-called Director of the Investigative Committee Chief Investigations Division; and Georgiy Muradov, so-called Deputy Chairman of the Council of Ministers and Permanent Representative to the President of the Russian Federation. Two of these individuals, Dmitry Polonsky and Georgiy Muradov, are additionally designated for being responsible for or complicit in, or having engaged in, directly or indirectly, actions or policies that threaten the peace, security, stability, sovereignty, or territorial integrity of Ukraine.

Additional E.O. 13660 Designation

The Salvation Committee of Ukraine also is designated pursuant to E.O. 13660 for being owned or controlled by, or acting for or on behalf of, directly or indirectly, former Ukrainian Prime Minister Mykola Azarov, whom OFAC previously designated under the same E.O. for the misappropriation of state assets of Ukraine.

Designations Regarding Crimean Entities (E.O. 13685)

Today’s action also targets the following 18 construction, transportation, and defense entities pursuant to E.O. 13685, which authorizes sanctions on, among others, any person determined to operate in the Crimea region of Ukraine. Except as otherwise noted, the persons listed below are designated for operating in the Crimea region of Ukraine.

Entities Involved in the Construction of the Kerch Bridge

Russia’s SGM-Most OOO, which is owned by previously designated gas pipeline construction company Stroygazmontazh, is the chief contractor for the construction of the Kerch Bridge, which would span the Kerch Strait to connect the Crimean peninsula with Russia.

PJSC Mostotrest is a major Russian construction company engaged in the construction of bridges, roads, and other transport infrastructure facilities. In March 2016, SGM-Most OOO awarded a multi-billion ruble construction contract to Mostotrest for the development of the Kerch Bridge.

OOO ‘STG-Eko’ conducted engineering and ecological studies for an Environmental Impact Assessment of the Kerch Bridge for AO ‘Institute Giprostroymost—Saint-Petersburg.’

OOO ‘DSK’ is a Russian construction company whose work includes building access roads to bridges and overpasses. OOO ‘DSK’ won an auction in September 2015 for construction work on access roads to the Kerch Bridge on both sides of the Kerch Strait.

FKU Uprdor ‘Taman’ is a Russian federal institution under the Federal Road Agency (Rosavtodor) authorized to help manage federal highways and related structures in Crimea and in Russian Federation territory. FKU Uprdor ‘Taman’ operationally manages the construction of the Kerch Bridge.

FAU ‘Glavgosekspertiza Rossii’ is a Russian federal institution authorized to conduct official examinations of project documentation for significant construction works in Russian Federation territory. In 2015, after Russia’s occupation and attempted annexation of the Crimean peninsula, FAU ‘Glavgosekspertiza Rossii’ opened a branch in the city of Sevastopol and reviewed project documentation for the Kerch Bridge.

Defense Firms Operating in Crimea

OOO Shipyard ‘Zaliv’ is a shipbuilding company in Kerch, Crimea formed after militants forcibly seized the shipyard from its previous owners in August 2014. It holds resident status in the so-called Republic of Crimea’s free economic zone and a license from the Russian government to develop military equipment.

Federal SUE Shipyard ‘Morye’ is a shipbuilding company located in Feodosia, Crimea. It has increased its capacity to construct military vessels and began constructing a guided missile ship for the Russian Navy in May 2016.

OAO Ship Repair Center ‘Zvezdochka’ performs maintenance work on ships and submarines and is located in Severodvinsk, Russia. It has a branch in Sevastopol, Crimea that performs repairs and maintenance work on Russian naval vessels.

SUE RC ‘Feodosia Optical Plant’ produces military optical products and is located in Feodosia, Crimea. It holds a license from the Russian government to develop military equipment and produces optical sights for tanks and heavy weapons.

OAO ‘Uranis-Radiosistemy’ produces radio equipment and is located in Sevastopol, Crimea. It holds resident status in the so-called Republic of Crimea’s free economic zone and a license from the Russian government to develop military equipment.

Entities Operating in Crimean Maritime Sector

Finally, the Sovfracht-Sovmortrans Group is designated pursuant to E.O. 13685 because it operates in the Crimea region of Ukraine. Affiliated companies SMT-K and LLC Koksokhimtrans are being designated for operating in the Crimea region of Ukraine and being owned or controlled by, or acting for or on behalf of, directly or indirectly, the Sovfracht-Sovmortrans Group. Sovfracht Managing Company LLC is being designated for being owned or controlled by, or acting for or on behalf of, directly or indirectly, the Sovfracht-Sovmortrans Group. Finally, OJSC Sovfracht and CJSC Sovmortrans are designated for being owned or controlled by, or acting for or on behalf of, directly or indirectly, Sovfracht-Sovmortrans Group and Sovfracht Managing Company LLC.

The Sovfracht-Sovmortrans Group is a Russian shipping and logistics company comprised of several companies, includingSovfracht Managing Company LLC, OJSC Sovfracht, CJSC Sovmortrans, LLC Koksokhimtrans, and SMT-K, a unit of the group registered in Crimea. SMT-K, an abbreviation for Sovmortrans-Crimea, has offices in Simferopol and Kerch, Crimea, and is the operator for a ferry line between the previously designated Port of Kerch in Crimea and Kavkaz in Russia. LLC Koksokhimtrans is the registered operator and manager of two vessels that have served as ferries between Crimea and Russia. Sovfracht Managing Company LLC has oversight over OJSC Sovfracht and CJSC Sovmortrans. OJSC Sovfracht is the flagship company of the Sovfracht-Sovmortrans Group and specializes in transporting of general cargo, while CJSC Sovmortrans specializes in container shipping.

Today, OFAC also identified a number of subsidiaries of Bank of Moscow and Gazprombank as being 50 percent or more owned by their respective parent entities, all of which were previously sanctioned pursuant to directives issued under E.O. 13662. Bank of Moscow and Gazprombank were previously sanctioned in July 2014; both are subject to Directive 1, which prohibits certain transactions or dealing in debt and equity of the sanctioned entities. OFAC has also identified subsidiaries of Gazprom, which is subject to Directive 4, which prohibits the exportation of goods, services, or technology in support of exploration or production for Russian deepwater, arctic offshore, or shale oil projects. The subsidiaries identified today were already subject to the same restrictions as their respective parent entities per OFAC’s Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked (“50 percent rule guidance”), which can be found here. These identifications will help the public more effectively comply with the sanctions on these companies.

Concurrent with today’s action, OFAC is also issuing a general license to authorize certain transactions for a limited period of time necessary to divest holdings in Mostotrest. To see the general license, click here.

For the identifying information related to today’s action, click here.

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